LIC is one of the first two insurance companies to start providing insurance to Indian customers. Over time, they have amassed both profit and faith from the numerous customers that have taken benefit of the plan, mostly owing to tradition.
However, over the years, the company has come under critical scrutiny by people for having important policy features such as sum assured and return rates at way less than most newer companies in the country are currently providing. One such plan that is causing confusion among consumers is the LIC Jeevan Saral Endowment policy.
Features of LIC Jeevan Saral-
LIC Jeevan Saral is a special plan by the LIC Corporation that basically is an endowment policy. One of the biggest selling points of this plan is the double death benefit of sum assured + return of premium excluding extra/rider premium and first year premium.
Under this plan, the premium amount payable can be decided by the policy holder. The total sum assured is 250 times the monthly premium. If the insured person survives the entire term of the life insurance policy, then he would receive the maturity sum assured + loyalty additions. This maturity sum is based upon the age of the policy holder at the time of application.
In the event that the policy holder dies during the term of the plan, then the nominee in the plan receives sum assured + return of premiums and first year premium + loyalty addition, if any. The death benefit does not depend on the age of the deceased at the time of application.
Partial surrender of the policy is only allowed after the 3rd year of the policy.
You will get an extended risk cover for one year on payment of premium of up to 3 years. You can even opt for higher cover through term rider and accidental death and disability benefits.
Loyalty additions are only applicable after the 10th year of the policy.
The plan is a very ingenious one as no other insurance company has been able to come up with a similarly flexible policy. The option of being able to choose your premium, and in turn, being able to choose your sum assured, might not be readily comprehensive but it is a great one. This means that people with any level of income can pay whatever they can pay, and still have a coverage of minimum sum assured as 250 times the premium payment made.
As an example, if you make a monthly premium payment of Rs 1,000. Over 10 years, your premium paid will be Rs 10,000. This means your sum assured will be Rs 10,000 x 250 = Rs 2,50,000.
Why The Confusion?
Somewhere between getting misinformed by insurance brokers to not understanding the written terms and conditions correctly, people have been constantly misjudging the return payment they are supposed to get from the company.
It is important to note that the maturity benefits and death benefits are way different to each other under this plan. More clearly, if the policy holder survives the term, then he gets only the maturity benefits + loyalty additions and if the policy holder dies, then the nominee gets only the sum assured + return of premiums, excluding extra extra rider premium/ first year premium.
Low Return Rates Confusion-
For all the innate ingenuity and flexibility of the plan, the return rates under this plan are actually quite low. As we’ve seen before, upon maturity of the policy, you get maturity benefits + loyalty additions. You will be informed of how much maturity you will be getting when you buy the plan.
The calculation of loyalty additions is what causing rage among people. Recent declaration by the LIC Jeevan Saral plan puts the loyalty additions at Rs 250 for 10-year policy and Rs 300 for 11 years’ policy. This puts the return rates of the LIC Jeevan Saral plan at only 3-4%.
Whether to buy LIC Jeevan Saral or not is completely based on the comfort of the consumer. Not every other company provides the flexibility to pay self-chosen premiums. However, the return rates are usually higher with other policies.